The changes in account balances of the Dunedin Corporation during 2014 are presented below:

Assuming there are no changes in retained earnings except for net income and a dividend payment of $19,500,the net income for 2014 should be
A)$6,000.
B)$13,500.
C)$19,500.
D)$25,500.

Question

The changes in account balances of the Dunedin Corporation during 2014 are presented below:

Assuming there are no changes in retained earnings except for net income and a dividend payment of $19,500,the net income for 2014 should be
A)$6,000. 
B)$13,500. 
C)$19,500. 
D)$25,500.

Quizplus · Accepted Answer

The net income for the year can be calculated by adding up the changes in all the account balances other than retained earnings. 
($4,800 + $1,200 – $2,700 – $2,100 – $1,500 = $300) 
Therefore, the net income for the year is $300. 
We also know that a dividend payment of $19,500 was made, so the total change in retained earnings would be ($300 – $19,500) = -$19,200. 
There were no changes in retained earnings other than net income and dividends, so this must be equal to the net income for the year. Therefore, the net income for 2014 is $13,500 ($19,500 – $6,000). 
Thus, the best choice is B.

The Changes in Account Balances of the Dunedin Corporation During